By CHRISTOPHER S. RUGABER and MARTIN CRUTSINGER, Associated Press
WASHINGTON (AP) — When the International Monetary Fund meets this weekend, its top goal will be as simple as it is difficult: Get member nations to pledge many more billions in aid — in case the IMF needs to rescue more European economies.
Yet even success would hardly inspire confidence in Europe's economy. It is, by all accounts, already in recession. And slowing economies elsewhere — from China to Brazil to India — may reduce the exports the continent needs to grow. European nations need faster growth to help lighten their debt loads.
All that is out of the IMF's control — whether or not it receives pledges of further aid this weekend.
"The extra IMF resources will serve as a backstop that will provide reassurance to financial markets," said David Wyss, former chief economist at Standard & Poor's. "But it doesn't address the issue of how you get growth started in countries that are in deep recessions."
What makes stronger growth so hard to achieve is that Europe's most troubled economies are under orders to cut — not boost — spending. That's part of the fiscal austerity deal under which many European Union members must curb spending to help combat the continent's debt crisis.
The IMF's policy meetings Saturday in Washington will focus on the more immediate task of raising more money. Its sister lending agency, the World Bank, will also hold policy meetings.
Before they do, finance ministers and central bank governors of the Group of 20 nations meet Friday to discuss Europe's debt crisis. The G-20 comprises traditional economic powers such as the United States, Germany and Japan and faster-growing emerging nations such as China, Brazil and India.
The IMF's managing director, Christine Lagarde, has scaled back her target for how much more aid the IMF needs member countries to contribute. The 188-nation IMF already has about $385 billion it can lend to troubled countries. In January, Lagarde had mentioned seeking up to $500 billion more in commitments.
Last week, she said less money might be needed because of stronger global growth. She didn't specify a figure. But she said Thursday that she's received about $320 billion in pledges and is seeking more.
Japan said this week it's prepared to contribute $60 billion. And three European countries that don't use the euro — Denmark, Norway and Sweden — pledged a combined $26 billion. The 17 euro countries already said in December that they would send an extra €150 billion ($200 billion) to the Washington-based fund.
Pressure on the IMF to support the most ailing economies could escalate. Investors are demanding higher interest rates to buy Spanish and Italian debt. Those increased borrowing costs for Spain and Italy have renewed fears that Europe's crisis could worsen after weeks of relative calm.
The United States has declined to provide more funding for the IMF. Congress would likely resist it. And the administration wants Europe to provide most of the additional lending resources.
U.S. Treasury Secretary Timothy Geithner noted this week that the Federal Reserve and other central banks have made it easier for European banks to get U.S. dollars to provide loans. Many banks lend in dollars because so much trade and investment is denominated in the U.S. currency.
"Europe is a rich continent," Geithner said at the Brookings Institution. "It has to play the dominant financial role."
But Geithner also said Europe must strike the right balance "between growth and austerity." Countries squeezed by debt must avoid cutting spending so much that it stifles growth, Geithner said. Slower growth would shrink tax revenue and worsen deficits, he said.
That point was sounded by the IMF in its latest World Economic Outlook. It forecast that the global economy will grow 3.5 percent this year, down from 3.9 percent last year.
The IMF warned of an even worse outcome if Europe can't defuse its debt crisis. It said global growth could drop 2 percentage points if Europe's problems escalate.